Economists from Crédit Agricole expect EUR/USD experience downward pressure in the near term. However, the pair is set to recover towards 1.11 in the coming months.

Short-term downside risks for EUR/USD

We see downside risks for EUR/USD from current levels in the near term and expect the recovery to continue until Q4 2023. This short-term weakness is due to the positive impact of the widening of the 2-year EUR-USD spread, which is more than offset by wider peripheral spreads against the Bunds and by the decreasing spread of EUR-USD box yields.

In the near term, we expect EUR/USD to see a gradual increase towards 1.11 over the next 6 to 12 months.

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